From low-tech supplier to high-tech provider The battle for the cockpit in China

Related Vendors

FAULHABER Drive Systems

Wuxi InfiMotion Technology Co., Ltd.

Quiz question for those familiar with the Chinese market: What do Volkswagen, NIO, GM, and Xpeng have in common in China? Answer: Many of their cars rely on products from manufacturers Desay and Huayang in the cockpit. These were completely unknown just a few years ago.

* Henrik Bork, long-time China correspondent for the Süddeutsche Zeitung and the Frankfurter Rundschau, is Managing Director at Asia Waypoint, a Beijing-based consulting agency specializing in China.

The two Chinese suppliers were virtually unknown just a few years ago. Now they aim to conquer their home market for "smart cockpits", with their central control units, LCD screens, and head-up displays (HUD) increasingly challenging Tier 1 suppliers like Bosch or Continental.

The rapid digitalization of electric cars in all areas and the preference of Chinese drivers for large, modern screens and a lot of high-tech behind the steering wheel have made the market explode.

Former low-tech supplier, now Continental competitor

At the same time, the technological entry barriers for manufacturers have dropped. Chinese companies that until recently only had relative "low tech" such as CD players or car speakers on offer, have virtually overnight become formidable players in the intelligent car market.

A particularly striking example of this is Desay SV, which since the beginning of this year has been in a head-to-head race with Continental for market leadership in LCD instrument panels in the People's Republic. Both companies installed more than 36,000 units in January and February 2024. Continental was just barely in first place among the leading suppliers in China, with a market share of 12.8%, ahead of Desay SV with 12.6%.

Just about five years ago, Desay was mainly building traditional car parts and audio systems for cars with combustion engines. But when the "Smart Cockpit" suddenly became popular in China in 2018 and electric cars like NIO's ES8 appeared in the spotlight, Desay's managers boldly bet on the new trend of integrating various high-tech components in the cockpit.

Reborn as a "Smart Cockpit" provider

Desay has impressively managed to transform from a traditional supplier to a tech provider for "Smart Cars". Not only have just about all major OEMs in China become customers of the newly reborn company as a "Smart Cockpit" provider, but also the market value of the company has temporarily grown to over 100 billion yuan (about 13 billion euros).

When it comes to the rapidly growing demand for ever more computing power, with which the various components of smart cars such as Lidar, ADAS cameras, electronic rear-view mirrors or HUD can be integrated, the American chip manufacturers Qualcomm and Nvidia with their SoCs are still ahead.

However, Chinese manufacturers are currently rapidly catching up in all other hardware and software in the Smart Cockpit. "The intelligence of automobiles has changed the traditional balance of power. The technical barriers of the original Tier-1 suppliers no longer exist and are replaced by the integration effect of technology stacks," writes the Chinese professional portal 36K about an industry in transition.

Smart Cockpit is easier to monetize than autonomous driving

"The Smart Cockpit has been recognized as an industry that is easier to commercialize than autonomous driving," the analysis continues. This has offered traditional auto suppliers a chance to manage their transformation into the age of e-mobility.

In addition to Desay SV, the Chinese Huayang Group is a particularly interesting example of such a successful transformation. They used to make a good living from the production and sale of CD players. At the same time as the market for cars with internal combustion engines began to gradually shrink, car entertainment also digitized.

Competitive pressure on Bosch, Continental and others is increasing

Like Desay, Huayang spent large sums on research and development. "The two companies felt they had to start their transformation very quickly," 36K describes the crisis moment about five years ago.

The Huayang Group resolutely plunged into the new niche of the Smart Cockpit. On the Chinese market for domain controllers, for example, but also with HUD and the new AR-HUD, the company now plays a significant role.

In summary, it can be said that this year has marked the beginning of a new, particularly intense phase in the battle for the cockpit in China. Chinese providers such as Desay, Huayang, or Autolink are increasingly competing with Tier-1 suppliers such as Bosch or Continental. The times when good relationships with individual OEMs were a major competitive advantage are irretrievably over. (me)

Electronics

China's LCD manufacturers dominate the market for car displays